Oxford Publishing Ltd to pay almost £1.9 million as settlement after admitting unlawful conduct in its East African operations

Oxford Publishing Ltd to pay almost £1.9 million as settlement after admitting unlawful conduct in its East African operations

03 July 2012

The Director of the Serious Fraud Office (SFO) has taken
action in the High Court, which has resulted in an Order that
Oxford Publishing Limited (OPL) pay £1,895,435 in recognition of
sums it received which were generated through unlawful conduct
related to subsidiaries incorporated in Tanzania and
Kenya.

Background

OPL is a wholly owned subsidiary of Oxford University Press
(OUP), which pursues its mission through five publishing divisions,
including the International Division. (See note 1 for
editors). The International Division has ten overseas publishing
entities with a head office in Oxford. Oxford University
Press East Africa (OUPEA) is based in Kenya but covers a
geographical region which includes Kenya, Burundi, Malawi, Rwanda,
Sudan and Uganda. Oxford University Press Tanzania (OUPT) is
based in mainland Tanzania but also has responsibility for the
semi-autonomous Zanzibar archipelago. Both OUPT and OUPEA are
wholly owned subsidiaries of OPL and part of the International
Division of OUP.

The business of all the International Division entities is
focused on the school text book market but most entities also have
well established local dictionary programmes and growing higher
education lists. The business activities include
participating in public tenders for contracts to supply governments
with text books and other educational materials for the school
curricula. These tenders may lead to contracts which are
supported or funded by the World Bank Group which is the collective
title for the International Bank for Reconstruction and Development
and the International Development
Association.

Self referral

In 2011, OUP became aware of the possibility of irregular
tendering practices involving its education business in East
Africa. OUP acted immediately to investigate the matter,
instructing independent lawyers and forensic accountants to
undertake a detailed investigation.

As a result of the investigation, in November 2011 OUP
voluntarily reported certain concerns in relation to contracts
arising from a number of tenders which its Kenyan and Tanzanian
subsidiaries, OUPEA and OUPT, entered into between the years 2007
and 2010. The SFO required OUP to follow a procedure based on
the guidance contained within its published protocol document
- "The Serious Fraud Office's Approach to Dealing
with Overseas Corruption".

Because two of the tenders were funded by the World Bank, OUP
also voluntarily reported on a potential breach of the World Bank's
Procurement Guidelines to the World Bank.

The SFO remit was broader in its scope than the World Bank
investigation in that it required investigation of all public
tender contracts whether or not funded by the World Bank.

The costs of the investigation were met by OUP.

The investigation was thorough - involving numerous interviews
and an extensive review of documents and electronic data - and
completed to the satisfaction of the SFO. The substantial product
of those investigations was presented to the SFO and, in a separate
presentation, to the World Bank. The product of that work led
the SFO and the World Bank to believe that OUPEA and OUPT had
offered and made payments, directly and through agents, intended to
induce the recipients to award competitive tenders and/or
publishing contracts for schoolbooks to OUPEA and OUPT.

Civil Recovery Order

As wholly owned subsidiaries, OUPEA and OUPT pay dividends and
certain fees to OPL. Accordingly, OPL has and would receive
revenue that had been derived from unlawful conduct; namely bribery
and/or corruption. Following an accounting examination of the
benefit obtained from the affected contracts, the SFO was in a
position to determine the appropriate amount to be recovered.
The approach to costs was conservative, with the result that the
agreed methodology produced a higher figure than would normally be
recognised as trading surplus in the accounts. No allowance
has been made for the payments which are considered bribes or
inducements.

The value of the Order made by the High Court is £1,895,435 (see
note 2 for editors). OPL will also pay the SFO costs of pursuing
the order which amount to £12,500. (See note 3 for editors)

Compliance procedures

Since the occurrence of the conduct that is the subject matter
of the civil recovery order, OUP has introduced enhanced compliance
procedures intended to significantly reduce the risk of recurrence
of such conduct within OUP. These procedures will be subject
to review by a monitor who will report to the Director of the SFO
within twelve months, with additional and separate reporting to the
World Bank. The monitor must meet strict criteria including
clear independence from OUP.

Reasons for civil recovery order

A number of relevant features have led to the decision to pursue
a civil recovery order in place of a criminal prosecution.
They include the following:

a) The test under the Code for Crown
Prosecutors in relation to the case meeting the criteria to
prosecute has not been met at this point and there is no likelihood
that such a standard would be met in the future. This view is
based on a number of factors including, but not limited to, (i) key
material obtained through the investigation is not in an
evidentially admissible format for a criminal prosecution and (ii)
witnesses in any such prosecution would be in overseas
jurisdictions and are considered unlikely to assist or co-operate
with a criminal investigation in the UK.

b) Difficulties in relation to obtaining
evidence from the jurisdictions involved and potential risks to the
personal welfare of affected persons.

c) OUP has conducted itself in a
manner which fully meets the criteria set out in the SFO guidance
on self reporting matters of overseas corruption.

d) There is no evidence of Board level
(or the equivalent) knowledge or connivance within OUP in relation
to the business practices which led to the case being referred to
the SFO.

e) The products supplied were of a good
standard and provided at 'open market' values. This means
that the jurisdictions involved have not been victims as a result
of overpaying for the goods or as a result being supplied goods
which were unsuitable or not required.

f) The resources needed to
facilitate an investigation into this matter are considerable e.g.
12 terabytes of data collected as
part of the investigation, and a civil recovery disposal allows a
better strategic deployment of resources to other investigations
which have a higher probability of leading to a criminal
prosecution.

g) The settlement terms ensure all
gross profit from any tainted contract will be disgorged.

h) OUPEA and OUPT will be
subject to parallel World Bank procedures which will result in them
being debarred from participating in future World Bank funded
tenders for a number of years.

The SFO has previously been subject to criticism in relation to
the transparency of the processes and proceedings in civil recovery
matters. As a result the Consent Order and Claim (which sets
out the basis for the proceedings) have been made public.

In addition to the property recovered under the civil recovery
order, OUP unilaterally offered to contribute £2,000,000 to
not-for-profit organisations for teacher training and other
educational purposes in sub-Saharan Africa. This was a
reflection of the seriousness with which OUP views the course of
events that were subject to the investigation and a wish to
acknowledge that the conduct of OUPEA and OUPT fell short of that
expected within its wider organisation. The contribution
would benefit the people within the affected region and be
consistent with the overall mission of OUP. The offer also
confirmed that the funds would not be used so as to provide OUP
with a commercial advantage

Although the benefits to the people of the affected region are
acknowledged by the SFO, the SFO decided that the offer should not
be included in the terms of the court order as the SFO considers it
is not its function to become involved in voluntary payments of
this kind. However, the SFO welcomes OUP's commitment
to make this contribution and to work with a range of
not-for-profit organisations in sub-Saharan Africa to achieve the
above objectives.

Statement of SFO Director

SFO Director David Green CB QC said;

"This settlement demonstrates that there are, in appropriate
cases, clear and sensible solutions available to those who self
report issues of this kind to the authorities. The use of
Civil Recovery powers has been exercised in accordance with the
Attorney General's guidelines. The company will be adopting
new business practices to prevent a recurrence of these issues and
these new procedures will be subject to an extensive and detailed
review."

Notes for editors:

Oxford University Press is a department of the University with
no separate legal personality of its own. The University, and
therefore OUP, operates as a charity with its principle mission
being "the advancement of learning by teaching and research and its
dissemination by every means". The University is a
corporation established under common law and formally incorporated
by the Oxford and Cambridge Act 1571. It is not governed by
the UK Companies Acts and does not have limited liability.
The affairs of the University are managed in the framework set out
in the Oxford and Cambridge Act 1923 and the University Statutes
and Regulations. Under those Statutes the affairs of OUP are
charged to a group of University academics known as "the
Delegacy". The Delegacy is required to establish a
Finance Committee to direct and manage the business, assets and
finances of OUP. The Finance Committee for OUP operates as
the equivalent to a Board of Directors. OUP is the world's
largest university press. It has a diverse publishing
programme that includes, but is not limited to, school and college
textbooks, dictionaries and reference books.

The funds will be utilised in accordance with the Asset
Recovery Incentivisation Scheme which, for cases of civil recovery,
result in the SFO receiving up to 50% of the value the monies
remitted to the Home Office by the Trustee.

The Order is made under section 276 of the Proceeds of Crime
Act 2002.

Details of previous SFO civil settlements are available in the
'Press room' section of our website as follows:-

Mabey & Johnson, 13 January 2012.

Macmillan Publishers Ltd, 22 July 2011.

MW Kellogg Ltd, 16 February 2011.

Related court documentation is available with this release as
follows:-

The Serious Fraud Office is a government department responsible
for investigating and prosecuting serious and complex fraud.
The SFO is headed by the Director (David Green CB QC) who exercises
powers under the superintendence of the Attorney General. These
powers are derived from the Criminal Justice Act
(1987).